e-cigarettes: no smoke without fire?

DISCUSSION PAPER

E-cigarettes: no smoke without fire?

N. Daniels*, C. Cosma, A. Llewellyn, D. Banks, H. Morris, J. Copeland and E. Djarlijeva

Presented to the Institute & Faculty of Actuaries, 24 February 2020, Edinburgh*Correspondence to: Niel Daniels, Institute and Faculty of Actuaries, 7th Floor, Holborn Gate, 326-330 High Holborn,London WC1V 7PP, UK. E-mail: [email protected]

AbstractSmoking was one of the biggest preventable killers of the 20th century, and it continues to cause the death of mil-lions across the globe.The rapid growthof the e-cigarettemarket in the last 10 years and the claims that it is a saferformof smoking, and canhelpwith smoking cessation, have led to questions being raisedon their possible impactto society, the health of the population and the insurance industry. Recent media attention around the possiblehealth implications of e-cigarette use has also ensured that this topic remains in the public eye. The e-cigaretteworkingpartywas initiatedby the Institute andFacultyofActuaries’HealthandCareResearchSub-Committee inJuly 2016, with the primary objective of understanding the impact of e-cigarettes on life and health insurance. Inthis paper, we have looked at all areas of e-cigarette usage and how it relates to insurance in the UK market. Inparticular, we have covered the potential risks and benefits of switching to e-cigarettes, the results of studies thathave beenpublished, the potential impact onunderwriting and claimsprocesses and the potential impact onpric-ing (basedonwhatmodelling is possiblewith thedata available). Research in this area is still in its infancy anddataarenotyetmature,whichmakespredicting the long-termimpactof e-cigarette smokingextremelychallenging, forexample, there are no studies that directlymeasure themortality ormorbidity impact of long-term e-cigarette useand so we have had to consider studies that consider more immediate health impacts or lookmore simply at theconstituents of the output of an e-cigarette and compare them to that of a cigarette. The data issue is further com-pounded by the findings of studies and the advice of national health authorities often being conflicting. For exam-ple,whileNationalHealth ServiceEnglandhaspublicly stated that it supports the growthof e-cigarette usage as anaid to reduce traditional smokingbehaviour, theUSFoodandDrugAdministrationhas beenmuchmore vocal inhighlighting theperceiveddangersof thisnewformof smoking.Users’behaviouralsoaddscomplexity, asdualuse(using both e-cigarettes and cigarettes) is seen in a high percentage of users and relapse rates back to cigarettesmoking are currently unknown.Having talked to a number of experts in the field, we have discovered that thereis certainly not a common view on risk. We have heard from experts who have significant concerns but also toexperts who do believe that e-cigarettes are far safer than tobacco. We have purposefully considered conflictingevidence and have consulted with various parties so we can present differing points of view, thereby ensuring abalanced, unbiased and fair picture of our findings is presented. The evidencewe have reviewed does suggest thate-cigarettes are a safer alternative to traditional smoking, but not as safe as non-smoking. There are no large, peer-reviewed, long-term studies yet available to understand the true impact of a switch to e-cigarette use, so currentlywe are unable to saywhere on the risk spectrumbetween cigarette smoking and life-time non-smoking it lies.Wedo not yet understand if the benefits seen in the studies completed so far will reduce the risk in the long term orwhetherotherhealth riskswill come to light followingmoreprolongeduse and study.This, coupledwith concernswith the high proportion of dual use of cigarettes and e-cigarettes, relapse rates and the recent growth inmedicalproblems linked with e-cigarette use, means that we need to wait for experience to emerge fully before firm con-clusions can be drawn. Although we have presented a view, it is vitally important that our industry continues tomonitordevelopments in this areaandfullyconsiderswhatnext stepsandfutureactionsmayberequired toensureourpositionreflects thepotentialbenefitsandrisks that e-cigaretteusemaybring.Wefeel that the time is right forabody such as the IFoA to analyse the feasibility of collecting the necessary data through theContinuousMortalityInvestigation that would allow us to better analyse the experience that is emerging.

This paper expresses the views of the individual authors and not necessarily those of their employers.

© Institute and Faculty of Actuaries 2020. This is an Open Access article, distributed under the terms of the Creative Commons Attributionlicence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, pro-vided the original work is properly cited.

British Actuarial Journal (2020), Vol. 25, e12, pp. 1–21doi:10.1017/S1357321720000112

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Keywords: E-cigarettes; Tobacco; Risk; Quit Rates; Modelling

1. IntroductionThe ultimate aim of this paper is to present information to understand the role of e-cigarettes insociety today and in the future, which could have significant ramifications not only for the protec-tion industry, but for the population in general. The e-cigarettes working party was initiated by theInstitute and Faculty of Actuaries’ Health and Care Research Sub-Committee in July 2016, with theprimary objective of understanding the impact of e-cigarettes on life and health insurance.

The working party comprises seven members who work across a variety of fields within theindustry, and we have consulted with several other professionals in the health and research sectorson the subject. We have been tasked with considering not only the impact of e-cigarettes today,but also suggesting and evaluating what future impact they might have. This will be looked at fromseveral industry perspectives: pricing, product design, underwriting, claims, advisers and chiefmedical officers (CMOs), from both the insurers’ and reinsurers’ viewpoints.

The scope of the work related to traditional e-cigarettes specifically, although it is acknowl-edged that there are other reduced risk products such as

• IQOS – Philip Morris’ heat-not-burn product;• Blu – Imperial Tobacco’s e-cigarette product;• JUUL – a popular e-cigarette in the US using nicotine salts, largely unknown in the UK; and• SNUS – a form of powdered tobacco popular in Sweden.

E-cigarette development, research and regulation is still in its infancy; consequently, there is a lotof contradictory information in the public domain. We have evaluated a significant number of pub-lished medical studies as well as liaising with industry experts, and we will be collating, contrastingand presenting published research and findings in this paper. Many medical studies are still in earlystages, and it will be many years before a true picture of the impact of e-cigarettes is known. Whilstwe have looked at a number of sources of information from across the globe, our aim has only everbeen to consider the UK insurance industry and as such this paper should be read in that context.

In this paper, we will discuss a number of interesting and evolving issues relating to the intro-duction of e-cigarettes and their impact on our industry. We have purposefully considered con-flicting evidence and have consulted with various parties so we can present differing points ofview, thereby ensuring a balanced, unbiased and fair picture of our findings is presented.

As industry professionals in the life and health sectors, we are familiar with the truly damagingand destructive impact that smoking has. We also understand that any successful effort to reduceor stop smoking can have a positive effect on one’s health, even after many years of smoking. Wetherefore feel that we have a responsibility to promote healthy life choices and encourage a path-way towards a smoke-free world.

Before work could begin in earnest, it was important that working party members had a goodunderstanding of exactly what an e-cigarette was and how it worked.

The e-cigarette was invented by Chinese pharmacist Hon Lik (Wikipedia, 2019), who patentedthe device in 2003 and introduced it to the Chinese market the following year. From there, itspopularity has grown and its use is now worldwide.

Lighting a traditional cigarette causes the tobacco to burn, releasing smoke that containsnicotine. The user breathes in the smoke to deliver nicotine to the lungs.

An e-cigarette does not rely on this process of combustion. Instead, an e-cigarette is a battery-powered device that converts liquid nicotine into a mist, or vapour, that the user inhales. Dependingon the e-cigarette, the user may simply inhale from the mouthpiece to begin the vaporisation processand deliver nicotine to the lungs, although some devices have a manual switch that activates thevaporiser inside. When the user exhales, the vapour looks much like a cloud of cigarette smoke.

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There is no fire, ash or smoky smell. Whilst e-cigarettes do contain some of the harmful chemicalsassociated with smoking cigarettes, they do not contain carbon monoxide (CO) and tar.

There are a variety of e-cigarette devices (e.g. Figure 1), differing mainly by appearance andbattery performance. The liquid or “smoke juice” that fills the cartridges/tank is made up of threemain ingredients:

1. Nicotine, which can be of various strengths.2. Propylene glycol, an additive approved for use in food or vegetable glycerin. These ingre-

dients are known to be irritants and have medical side effects including allergic reactions.Propylene glycol may be more commonly known for its use in fog machines that create asmoky atmosphere at stage shows.

3. Flavourings, of which there are many, for example, cherry, menthol, peppermint, vanillaand chocolate.

A key part of our work is understanding how these ingredients potentially impact a user’shealth.

2. The Core ProblemThere is a wealth of established and accepted data on the effect of smoking on health. Insurers areable to accurately price mortality and longevity risks for smokers. However, this was not alwaysthe case. Cigarettes, when they were first available, were thought to be healthy. In fact in the 1940sand 1950s, they were being promoted as “good for your health”. It took many years of medicalstudies to demonstrate a more accurate picture.

The explosion in e-cigarette use has brought similar challenges and made it difficult for thisgroup to come up with definitive answers. The main challenges have been

• lack of mortality data – it will be 20 to 30 years before it is available;• lack of claims experience to demonstrate whether e-cigarettes will lead to fewer smoking-related claims or not;

• sustainability of e-cigarette usage – the relapse rate is currently unknown due to lack of data;and

• safety of e-cigarettes – huge differences in opinion, depending on who is approached.

To try to overcome the challenges, it was felt that analysis needed to be broken down into fourmain streams to allow the report to be prepared.

The following areas were analysed.

2.1 Medical Research

• Research into the relative risk of e-cigarettes.

Figure 1. Anatomy of an e-cigarette.

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• Incidence rate of cancer, respiratory disease and cardiovascular disease on e-cigarette users.• Research into the safety of the three main e-cigarette ingredients.• Research into the impacts of e-cigarette usage on smoking cessation rates, relapse rates anddual usage (those who smoke cigarettes and e-cigarettes).

2.2 Social Demographics

• Data on usage amongst different groups (age, sex, region, smoking status and socio-economic group).

2.3 Legislation and Regulation

• How legislation may impact usage?• The possible impact of changes in public policy on where people can smoke.• The possible impact of regulation of e-cigarette devices, nicotine strength and liquidflavourings.

2.4 Modelling

• Modelling the impact of e-cigarettes on smoking prevalence.• Modelling the impact of e-cigarette usage on mortality and morbidity.

3. Health risksThe rapid growth in the popularity of e-cigarettes over a short time period, less than a decade,means that there is a shortage of comprehensive analysis to enable us to understand the long-termeffect of e-cigarettes on health. There are short-term studies that give indications about possiblerisks, but only time will provide the data needed to be confident about any conclusions drawn.

Observational studies and randomised control trial evidence that has been conducted to datecan be broadly summarised into two categories: health risk and smoking cessation.

The health risks of e-cigarettes have been examined by looking at them through variousdifferent lenses:

• ingredients;• toxicology;• impact on genetic material;• tissue damage;• cardiovascular impact;• respiratory function;• cancer;• smoking cessation.

3.1 Ingredients

There are approximately 600 ingredients American Lung Association (2019) in cigarettes, andwhen burned cigarettes create more than 7,000 chemicals American Lung Association (2019).Many are known to be toxic and at least 69 cause cancer American Lung Association (2019).Significantly, e-cigarettes do not produce tar or CO, two of the lethal ingredients in cigarettesmoke. In addition, e-cigarettes contain only up to 15 ingredients American Lung Association(2019) and fewer cancer causing chemicals, so they have the potential to be less harmful.However, some of the ingredients and chemicals they do contain, cannot be considered harmless.

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3.2 Toxicology

Various chemical substances and ultrafine particles known to be toxic have been identified ine-cigarette aerosols, cartridges, refill liquids and environmental emissions:

• ultra-small aerosol particles – may increase the risk of cardiovascular disease;• Nicotine – the highly addictive element of smoking;• propylene glycol – a common and safe additive for food, but which has not been tested foringestion into the lungs. There is some evidence of it being an airways irritant;

• diethylene glycol – linked to lung damage;• flavourings –mostly thought to be harmless but cinnamon, vanilla and buttery flavours havebeen found to impact health;

• metals such as lead, nickel, manganese, chromium and cadmium;• diacetyl – a chemical linked to bronchiolitis obliterans or “popcorn lung”;• acetaldehyde and formaldehyde – known carcinogens• acrolein – has been shown to cause irreversible lung damage.

The majority of research is showing that these chemicals are present at lower levels ine-cigarette output than in cigarette output, although howmuch safer this makes them and whetherthey increase the risk of cancer, heart disease and lung problems, and by how much, is still a sub-ject for further investigation.

3.3 Impact on genetic material

The basic cause of cancer is damage to DNA, causing mutations in genes which means cells mul-tiply out of control and do not repair themselves properly. It is well established that mutations canbe caused by tobacco smoke, which is why cigarettes have a proven link with cancer.

Chemicals known to damage DNA include formaldehyde, acrolein and methylglyoxal, all ofwhich are present in e-cigarette vapour. Preliminary studies show that they are present in suffi-cient quantity to cause DNA changes. Research published by Lee et al. (2018) found thate-cigarette vapour exposure caused DNA damage in the lungs, bladder and heart of mice.Another small study carried out in 2018 by Balbo and Dator (2018) investigated the effect ofa 15-minute vaping session on oral cells in five people and found that acrolein had reacted withDNA in their cells. In view of these results, a much larger study is now planned over a longer term.

The aim of future research will be to see whether cells can repair the damage and replicatenormally, or whether they are going to continue down the path of malignant change.

3.4 Tissue damage

The majority of research about the health impacts of e-cigarettes is taken from epidemiologicalstudies and clinical trials, but there have also been a number of laboratory-based investigationswhich test the cytotoxicity of chemicals in e-liquids, and those generated during aerolisation, usinganimal and human tissue. These investigations look at the effects of vaping on endothelial celldysfunction and oxidative stress.

Vascular endothelium is the thin layer of cells lining the blood vessels. It has a complex role inactively controlling many functions. One function is to help regulate blood flow by relaxing thearterial walls and increasing blood flow, thereby lowering blood pressure which is important if theheart rate rises, for example, during exercise. Reduced vasodilation through stiffened arterial wallsis associated with hypertension, coronary artery disease, peripheral vascular disease and heart andkidney failure. A healthy endothelium also suppresses thrombosis and vascular inflammation,both of which are associated with atherosclerosis and heart disease. It therefore follows that adysfunctional endothelium leads to an increase in these conditions.




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The effect of tobacco smoke on endothelial cells, and the resulting increased cardiovascularrisk, is well documented and accepted. The question is whether vaping has a similar effect.

There is substantial evidence that e-cigarettes can induce endothelial cell dysfunction.Several studies have investigated the effect of e-cigarette aerosol extracts on human umbilical

vein endothelial cells (HUVECs), looking at the response to exposure of different liquids and con-centrations of nicotine. The effect was measured using the known responses to combustibletobacco, including nitric oxide net availability, reactive oxygen species (ROS) generation, expres-sion of adhesion molecules, regeneration of endothelial cells, cell morphology and DNA damage.

Exposure to extracts from e-cigarette aerosols does provoke these responses in HUVECs butoften to a lesser extent. An example of this is a study published by Anderson et al. (2016) whichshowed a 4.5-fold increase in ROS levels over control values. However, this value is lower than the7.8-fold increase produced by combustible tobacco cigarette smoke.

Schweitzer et al. (2011) carried out two studies in 2011 comparing the effect of tobacco ande-cigarettes on pulmonary epithelium and endothelium cells of rat lungs and human bronchialcells. The effects of e-cigarette components were similar to that of combustible tobacco, butdiminished.

Oxidation is the metabolic process of our cells. Oxidative stress is caused by the inability todetoxify natural metabolic compounds, leading to cell damage and inflammation. This causesa vast number of diseases including cancer and heart disease. Cigarette smoking is well knownto cause oxidative stress, and current emerging research is showing that oxidative stress can alsobe caused by e-cigarette use, although at lower levels, and results have been mixed.

Studies carried out on bronchial epithelial cells by Anthérieu et al. (2017), kidneys in rats byGolli et al. (2016), and mouse lungs, Lee et al. (2018), did not show increased levels of oxidativestress when exposed to e-cigarette components. However, Ji et al. (2016) found an increase inoxidative stress on oral epithelial cells.

3.5 Cardiovascular impact

Cardiovascular events are rare prior to age 60. Given the immaturity of the e-cigarette market, andthe fact that e-cigarette users are on average 7 years younger than smokers, it may take a signifi-cant period of time before e-cigarette usage can be demonstrated to result in actual cardiac events.This leaves the industry exposed to the long-tail risk which may yet emerge: a particular concernfor long-term life cover and critical illness products.

While it is likely that e-cigarettes cause less harm to the cardiovascular system than smoking,we have already seen that research suggests they can alter the heart rate and blood pressure, whichare precursors to vascular disease.

Several studies indicate that e-cigarette use elevates the risk of experiencing a stroke or myo-cardial infarction, and Bhatta & Glantz (2019) even suggest that dual usage is riskier in this contextthan using either cigarettes or e-cigarettes alone. If so, given the promotion around usinge-cigarettes as a cessation aid, this could have negative, unintended health repercussions.

Myocardial infarction is not the only cardiovascular risk that has been examined. Anotherstudy found there were no adverse effects on left ventricular myocardial function after use ofan e-cigarette, unlike cigarettes, demonstrating that e-cigarettes could have a lower short-termcardiovascular risk compared to cigarettes (Farsalinos et al. 2014).

Ultimately, although there are indicators of increased cardiovascular risk due to e-cigaretteusage, the majority of papers and experts agree that the risk is potentially lower than that of ciga-rette smoking. A recent study by Farsalinos et al. (2019), which uses the Centers for DiseaseControl and Prevention 2014, 2016 and the 2017 National Health Interview Survey data, foundthat even though e-cigarette users may have an increased risk of a heart attack by up to 55%

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compared to non-smokers, this compares to an increase of 165% for cigarette smokers. There wasno statistical evidence to suggest that the risk of a stroke was any different for e-cigarette users,again in stark comparison to the 78% increased risk for smokers.

Other studies found evidence to contradict this. Prasad et al. (2017) looked at the increased riskof stroke and found that the levels of oxidative stress produced by e-cigarette aerosol and com-bustible tobacco smoke were the same in mouse brain cells, and the authors concluded from thisand other tests that e-cigarette exposure is as damaging as that of combustible tobacco smoke. Theevidence appears somewhat contradictory, so it is clear that further research is needed to studyoxidative stress and the implications of that for e-cigarette safety.

3.6 Respiratory function

Cigarettes have long been known to affect the respiratory system. The interaction of the chemicalscontained in tobacco with the lungs and respiratory system has been closely studied and under-stood for some time. The impact of how e-cigarettes and the chemicals they contain interact withthe respiratory system is much less well known, and the issue is complicated by the sheer variety offlavourings and chemicals that can be found in e-cigarettes.

The chemicals contained in e-cigarettes have been shown to cause clear changes in lungbiology, although it is not clear yet whether this results in lung disease (Husari et al., 2016). Ithas also been shown that e-cigarette vapour boosts the production of inflammatory chemicalsand disables key protective cells in the lung (Allen et al., 2016).

E-cigarette vapour contains diacetyl, a chemical which causes a severe respiratory disease calledbronchiolitis obliterans in microwave popcorn workers (and therefore commonly referred to as“popcorn lung”) because in their working environment they inhale heated vapours containing thechemical. This has been widely reported in the media, mostly based on a Harvard study inDecember 2015 that found the presence of diacetyl in 39 of 51 flavours tested (Allen et al.,2016). The study did not confirm that the presence of diacetyl in vapour caused lung problems,but because of the association between diacetyl and bronchiolitis obliterans among workers inhal-ing heated vapours, it recommended urgent action to further evaluate the extent of this new expo-sure. The use of the chemical in e-liquids was banned in the UK in 2016 under the EU TobaccoProducts Directive (TPD).

All the studies that have reported are on a small scale, and there have been no long-term studiescompleted. Although evidence suggests e-cigarettes can cause respiratory problems, until suchlong-term studies are undertaken the extent of the issue and how it compares with the problemscaused by tobacco smoke is unknown.

3.7 Cancer

While e-cigarettes may not categorically cause cancer, we have already seen there is evidence thate-cigarettes may cause precursor events to cancer, such as lung inflammation and DNA damage.

The research carried out by Lee et al. (2018) is the first study to definitively link vaping withcancer. Interestingly, although nicotine has not been regarded as carcinogenic, in Lee’s study22.5% of the mice exposed to vapour with nicotine developed lung cancer during the 4-year trial,but no mice developed cancer if they were only exposed to e-cigarette vapour without nicotine.The researchers felt that it would be another decade before they had enough research to evaluatethe impact of e-cigarettes on humans.

3.8 Cessation

Data on the impact of e-cigarettes on smoking cessation are very limited. Again, there are con-tradictory sources but few of these are studies of the form that would give us any comfort. One




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study by Hajek et al. (2019) produced in January 2019 looked at 886 National Health Service(NHS) stop smoking services users and randomly allocated them to two groups – one group giventraditional nicotine replacement therapy (NRT) such as patches and one given e-cigarettes. After 1year of follow-up, the proportion of those who were assigned e-cigarette who were still non-smokers was 18% compared to 9.9% of those assigned other NRT products. This implies thate-cigarettes are twice as effective as traditional NRT in helping people quit but a more conservativeview would be that even then 82% of people had relapsed back to smoking.

4. Public Health England viewPublic Health England (PHE) is an executive agency of the Department of Health and Social Care,bringing together public health specialists from over 70 organisations to provide the government,local government, the NHS, parliament, industry and the public with evidence-based, professionalscientific expertise and support. Its aim is to protect and improve the nation’s health and wellbeingand reduce health inequalities. PHE works closely with public health professionals in Wales,Scotland and Northern Ireland.

PHE has been monitoring e-cigarettes and heated tobacco products and produced its first tworeports in 2014 (PHE, 2014) and a third update in February 2019 (PHE, 2019). PHE used peer-reviewed literature, surveys, reports and data sourced by, and made available to, a panel of leadingindependent tobacco experts.

PHE made the statement that e-cigarettes are 95% less harmful than cigarettes, which drewcriticism from some, not for stating that e-cigarettes are less harmful, but because of the figureof 95% which appears to be an estimate. As we have seen, the general consensus of opinion is thatmore research is needed before the safety of e-cigarettes can be verified.

PHE made the following points in their initial report.

• The long-term impact of nicotine on lung tissue is not yet known.• Further research is needed on the similarities and differences in addictiveness of e-cigarettesand tobacco cigarettes and the potential harms associated with inhaled nicotine.

• E-cigarettes are not attracting many young people who have never smoked.• The prevalence of e-cigarette use in adults in the UK has plateaued at 6% of the adultpopulation.

• Never smokers are rarely taking up e-cigarettes.• Socio-economic differences in e-cigarette use by smokers and recent ex-smokers havebecome smaller with no clear gradient in prevalence by occupational grade.

• The prevalence for dual use is similar for e-cigarette users and NRT users.• Nicotine concentration is now limited by law to 20 mg/ml.• The most common reason for e-cigarette use continues to be to help stop smoking. However,the relapse rate is not yet known.

• More research is needed into patterns of e-cigarette use and its impact on health.• There is currently no evidence that flavourings in e-cigarettes pose a health risk.• 44% of smokers in the UK think e-cigarettes are equally or more harmful than smoking.

5. ModellingThere are many different types of e-cigarette users (which are not mutually exclusive, andinclude):

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• cessation aid smoker – users utilising e-cigarettes as a method of giving up smoking or reduc-ing their current smoking intake;

• committed smoker – supplementing their existing smoking habits with additional e-cigarettesmoking;

• e-cigarettes only/dual user – users solely smoking e-cigarettes or using them in conjunctionwith cigarettes;

• nicotine/non-nicotine user – users using e-cigarettes with or without nicotine;• regular/social smoker – smoking e-cigarettes regularly (normally defined as at least one cig-arette per day) or socially using e-cigarettes; and

• inhalation behaviour – number of puffs smoked and depth of vape inhalation.

Currently, the insurance industry applies a “one size fits all” approach to smokers with regardto pricing and underwriting. Given the huge variety of smoker types and habits, this is a rathercrude, as well as an incorrect, way of pricing the relative risk as compared to non-smokers.

Unfortunately, the data/figures/statistics needed to accurately distinguish and therefore pricebetween these smoker “types” is unavailable, and moreover, there are no reliable (and affordable)methods for insurance applicants to prove which category of smoker they fall into.

Also, in addition to the non-binary nature of smoking in the 21st century, there is the fluidity ofsmoking statuses, where smokers are less likely to stick to just one category of smoker status forthe duration of a long-term insurance contract. Therefore, we must also effectively price in thefuture transition rates between smoker states in order to “perfectly” price the risk.

In a traditional smoker/non-smoker world, the modelling is a relatively simple case of a three-part multi-state model with non-smokers (including ex-smokers and “never smokers”), smokersand dead.

Diagrammatically this looks as shown in Figure 2:When we introduce e-cigarettes, we have a far more complex model (Figure 3 where the various

transitions will depend on the relative weighting of various smoking categories):When we consider that each of these transitions requires parameters that potentially vary by

age, sex, period since quitting/starting, socio-economic group, level of smoking and so on, itbecomes clear just how complex the modelling is. Currently, it is impossible to derive estimatesof these parameters in a crude form, let alone anything remotely accurate. Therefore, instead oftrying to offer an overly complex, but yet spuriously accurate model, we have done somethingessentially quite simple. We have looked at the impact of e-cigarettes on enhancing the quit rateand have assumed that the extra “quitters” stay with e-cigarettes and that their risk changes fromsmoking risk to e-cigarette risk over a fixed period.

There are currently 7.2 million smokers in the UK according to Action in Smoking and Health,(2019). If e-cigarettes did in fact enhance the quit rate, say by 2% per annum, and assuming thatthe ex-smoker mortality rate reverts to a non-smoker rate over a period of 15 years then, over thesame period, extra quitters from e-cigarettes could lead to upwards of 7,500 deaths per year savedacross the UK population.

The model works as follows:

• assuming a block of protection term assurance (scaled to current UK term in-force volumes)l• all modelled with one single model point (20-year term, age 40, male);• modelled assuming that

○ non-smokers are at 100% relative mortality;○ smokers are set with relative mortality as per TSM00/TNM00;○ e-cigarette users are all “recent quitters”, and their mortality starts at that of smokers andreduces down linearly to that of non-smokers over a 15-year period;




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○ e-cigarettes lead to a higher smoking cessation rate (tested various scenarios);○ e-cigarettes are a certain % safer than tobacco (tested scenarios on the % safer);○ standard market approach to lapses and discount rates.

Using a total term market in force of £4,400 m, then additional smoking cessation could lead toan improved position for the UK term assurance portfolio as set out in Figure 4.

There are a few key simplifications and limitations to the model.

• Relapse rates. These have not been modelled but are not trivial. A recent study (Hajek, et al.,2019)shows that 82% of those who tried to quit relapsed back to smoking after 1 year.Isolating the relapse patterns for e-cigarettes is unfortunately not yet possible. It is also worth

Figure 2. Multi-state model pre e-cigarettes.

Figure 3. Multi-state model post-introduction of e-cigarettes.

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noting that further developments in the delivery of nicotine in e-cigarettes could potentiallyreduce relapse rates in the future.

• Gateway risk. The impact of non-smokers taking up e-cigarettes has not been modelled. Thiswould have a negative impact on the scenarios modelled above; however, despite this beingviewed as a material risk in the US, the view in the UK is that the risk is low.

• Dual usage. The impact of dual usage has not been taken into account. It has been assumedthat the key use of e-cigarettes is in aiding smoking cessation, not complementing or replac-ing their current smoking habits.

As can be seen from Figure 4, the impact on the total claims value is highly dependent on theparameters chosen, and although very simplistic modelling, it does show that e-cigarettes couldhave a very significant positive impact on the value of protection books if these assumptions areborne out. The industry should continue to monitor emerging evidence as it becomes available, inorder to develop the most accurate view of the impact of this emerging field.

6. Survey of protection underwritersTwo surveys of protection underwriters in the UK market have been conducted to better under-stand their thoughts and approach to e-cigarettes (The Institute of Actuaries: E-cigarette WorkingParty, 2017 and 2019). The recipients of the survey were largely the same group of people.

All respondents have an official position on e-cigarettes, with the majority treating users in thesame manner as smokers. Previously, in 2017, a number of offices stated that they treat e-cigarettesusers as non-smokers with a loading but there has been a shift to applying smoker rates for all e-cigarette users, with one respondent stating, “this is based on Reinsurance changes and our ownCMO view”. This is despite acknowledgement of “increasing pressure to treat [e-cigarette users]differently to smokers”.

Most application questions still do not differentiate between different types of tobacco usage,and there were only a handful of respondents who specifically include an e-cigarette question aspart of the application process. Furthermore, fewer than half of those surveyed in both 2017 and2019 actually collate and utilise the data collected on tobacco and/or e-cigarette usage.

There has been an increase since 2017 in the number of companies conducting research on e-cigarettes. However, still fewer than a fifth are heading their own primary research (see Figure 5).

Scenario E-cigarettes are

what % safer than cigarettes

E-cigarettes result in an increased smoking

cessation rate by what %

Total present value of claims - Impact

(UK term assurance portfolio) E-cigarettes are the same

risk as cigarettes, no impact on smoking

cessation

0% 0% £0m

PHE view on e-cigarette relative risk, 1% increase

in smoking cessation m854£%1%59

PHE view on e-cigarette relative risk, 2% increase

in smoking cessation 95% 2% £863m

E-cigarettes are 50% safer than cigarettes, 1%

increase in smoking cessation

m142£%1%05

E-cigarettes are 10% safer than cigarettes, 5%

increase in smoking cessation

10% 5% £191m

Figure 4. The impact on UK term market value under various e-cigarette risk scenarios.




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Further published research and increased prevalence of e-cigarette smokers are considered thebiggest drivers of an expected change in attitude towards e-cigarettes. However, changes in legis-lation (UK or global) are consistently not seen to be a significant driver.

There has been an increase in the number of respondents who expect there to be an industry-wide change in attitude towards e-cigarettes, increasing from 82% to 95%, with the majority ofrespondents now believing this will be seen within the next 3 years.

However, these surveys demonstrated that the direction of this expected change is highlydebated.

7. Product designThe uncertainty around the actual risk of e-cigarettes and their impact on current and futurehealth as well as their effect on smoking cessation rates makes it difficult to develop traditionallong-term guaranteed products.

There is strong evidence (e.g. WHO (2019), NHS (2019) and Johns Hopkins Medicine (2019))that the risks for ex-smokers follow a curve which is highest immediately following quitting andthen drops steadily, almost to a level of a never smoker after a period of time. This period is oftencited as 10–20 years, although other factors such as the period of smoking, the intensity of smok-ing and the specific medical condition in question will all influence the shape and duration of thereduction in relative risk. The impact of smoking cessation on life expectancy (Jha et al., 2013) canbe seen in Figure 6.

Currently, insurance products are offered with rates on a binary basis: smoker versus non-smoker. These could be replaced with a grading of rates from smoker to recent ex-smoker toa long-term ex-smoker and finally, a never smoker. See Figures 7a and 7b.

The shift away from binary smoking rates was in fact already starting to be developed prior tothe launch of e-cigarettes. However, their emergence and following surge in popularity means anextra dimension to the smoker rating curve conundrum as to where an e-cigarette user maybelong.

There is a variety of product features that could be considered to mitigate the uncertainty.Reviewable contracts could be used to reduce the exposure to uncertainty over the relative risk

of e-cigarettes over time. A certain assumption about their risk, for example, “e-cigarettes are xx%safer than cigarettes”, could be used and the pricing set accordingly, and reviews used if thisassumption is not borne out in practice. However, on current evidence insurers possibly should

Figure 5. Survey question on the quantity of research being done by offices.*Note – respondents may select multiple answers




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be hesitant about being too aggressive with the opening assumption. Conversely, if insurers are tooconservative, it could be to the detriment of customers using e-cigarettes; they may end up payingtoo high a premium for their risk. Finally, the life industry is slowly moving away from reviewablecontracts so we doubt that this will be a widely championed solution.

Figure 6. The impact of introducing e-cigarettes on risk profit. (a) Impact of smoking cessation on life expectancy of a 30year old. (b) Impact of smoking cessation on life expectancy of a 60 year old.

Current binary pricing approach:

Non-smoker Smoker

Possible non-binary pricing approach:

Long- term ex-smoker

Recent ex-

smoker

e-cigarette smoker

(a)

(b)

Figure 7. (a) Binary smoking model. (b) Realisation that smoking is not binary.




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Perhaps the motivation behind e-cigarettes usage should be taken into account. Those usinge-cigarettes for the purposes of smoking cessation could be given a transitional rate whereby theythen work towards a final end or “goal” rate when they finally become smoke-free. Ultimately,companies should be encouraging as many customers as possible to become smoke-free, and thisis an opportunity to incentivise and influence behaviour. As per Office for National Statistics(2018) data, the main reasons in the UK given for using e-cigarettes by cigarette smokers andex-smokers are as an aid to stop smoking (53.8%), and the perception that they are less harmfulthan cigarettes (10.6%). So, cigarette smokers are trying to make “health-conscious” decisionsregarding their smoking.

Using e-cigarettes as a smoking cessation tool is different from:

• smokers who are migrating from cigarettes to e-cigarettes but have no intention of quitting;• smokers who may be supplementing their traditional smoking habits with increased fre-quency, strength and/or volume of smoking; and

• people who have started smoking e-cigarettes despite never smoking cigarettes.

It is very difficult to distinguish, and consequently price, for these scenarios.The contract reviewability aspect could also apply to the smoker status of the customer, rather

than just the rates themselves. Customers could be asked to complete an annual assessment oftheir smoking status. An initial rate could be given based on their smoker status at that pointin time. For example, if a customer was a current smoker, smoker rates would be applied.Each year following, they would be required to verify their smoker status, comparable to theVitality (2019) approach to certain health factors. This could be via self-certification with rand-omised checks or could even utilise independent testing and verification if efficient and cost-effective. The annual process could be streamlined by implementing certain rules. For example,lifelong non-smoker rates apply after five successive years of non-smoker certification. Theadministrative burden of this course of action, associated costs and inconvenience to the customerwould have to be considered.

Similarly, short-term contracts may also mitigate some uncertainty around pricing fore-cigarettes by reducing the funnel of doubt. However, this does not address customers’ needfor long-term insurance.

The design of products and pricing is dependent upon on the ability to reliably assess an appli-cant’s rating factors and associated risk. Insurers need to be confident that they could accuratelyascertain smoking habits and, where applicable, the period since quitting for any form of smoking.The current cotinine test simply identifies the presence of nicotine by-products and is not helpfulin discriminating between different sources of nicotine exposure. Tests are being developed but,before we can rely on them, we will need confidence in their accuracy.

Whilst none of the major insurance players in the UK have taken any considerable steps in thedirection of a spectrum of smoker statuses, one of the most well-known tobacco companies, PhilipMorris, has entered the insurance market with the launch of Reviti (2019). It is underwritten byScottish Friendly Assurance Society. Reviti offers long-term term-life insurance with a number ofdifferent non-smoker and smoker statuses as shown in Figure 8.

Reviti offers a discount on premium rates to smokers who have switched from cigarettes toalternative smoking devices. The discount is up to 25% for those switching to IQOS (PhilipMorris’ own heat-not-burn product) but only 15% discount to those who switch to any othere-cigarette or vaping device. Whilst this is a step in the direction of recognising that smokingis not binary and need not be priced as such, the neutrality, evidence and motivation behind thisproduct offering should be interrogated closely given that they are, in effect, encouraging pur-chases of IQOS devices as part of the insurance cover. As previously stated, the evidence to accu-rately determine the appropriate price differential (if any) and the short-term and long-termadherence to e-cigarettes over cigarettes is not readily available yet, let alone the ability to




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determine the risk differential between various different types of e-cigarettes, heat-not-burn devi-ces and alternative vaping products. Ultimately, it is debatable whether Phillip MorrisInternational (2019), who have stated that their vision is “these products will one day replacecigarettes” should be spearheading the approach for the insurance industry.

Comparison and aggregator sites, underwriting manuals and industry platforms such asUnderwriteMe are possible industry focal points where a change may instigate a shift in the indus-try in a multitude of areas – advisers, underwriting, research, pricing and product design.However, on currently available evidence, such a change is unlikely. Data collection on smokingand behavioural understanding of customers must be prioritised in order to increase knowledgeand understanding of e-cigarettes (and other alternative smoking devices) collectively within theindustry. This is not currently the case as demonstrated in the surveys Institute & Faculty ofActuaries (IFoA) (2017) and IFoA (2019). Despite almost 85% of companies collecting informa-tion on e-cigarettes as part of the application process, fewer than half of those are actually collatingor utilising this information.

8. LegislationLegislation under the Health Act 2006, which prohibits smoking cigarettes in enclosed public pla-ces and workplaces, on public transport and in vehicles used for work, is based on conclusivescientific evidence of the direct health harm caused to bystanders through the inhalation ofsecond-hand smoke. E-cigarette use is not covered by smoke-free legislation.

The TPD 2014/14/EU introduced new rules for nicotine-containing electronic cigarettes andrefill containers from May 2016. New rules include

• maximum capacities and nicotine strength allowed○ tank capacity: 2ml;○ e-liquid refill container capacity: 10ml;○ nicotine strength of e-liquid: 20mg/ml;

• Other safety and quality standards:○ child-resistant and tamper evident packaging;○ prohibition of certain additives such as colourings;○ protection against breakage and leakage, and a mechanism for ensuring re-filling withoutleakage;

• Retailers and producers of e-cigarette products cannot be advertised or promoted, directly orindirectly:○ on TV or on-demand TV;○ on radio;○ through information society services (this includes, e.g. Internet advertising and commer-cial e-mail);

○ in certain printed publications: newspapers; magazines; periodicals and similarpublications;

Reviti non-binary pricing approach:

Non-smoker

Ex-smoker (>1 year)

Heated Tobacco (IQOS)

E-cigarette smoker/ vaper

Smoker

Figure 8. The potential risk profile of various smoking statuses.




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• the directive also prohibits○ sponsorship of television and radio programmes which promote electronic cigarettes;○ product placement of electronic cigarettes;○ sponsorship of activities or individuals that involve or take place in two or more EuropeanEconomic Area states or otherwise have cross border effects.

These restrictions are more limited than those which apply to tobacco advertising, where allforms of advertising and sponsorship by tobacco companies are prohibited. The 2015 prohibitionon selling e-cigarettes to under-18s, and on adults buying them on behalf of under-18s, has alsoprovided additional protection for children and young people.

9. Underwriting and claims9.1 Underwriting

The basic premium for smokers is higher than that for non-smokers, so there has in the past beena high level of misrepresentation of smoking habits at application stage. This has resulted in a dropin premium income, which is compounded by a rise in claims expenses. When cotinine testingwas introduced as a method of confirming whether someone was a non-smoker, the level of mis-representation fell, largely due to the sentinel effect of testing. Today, even though only a smallpercentage of cotinine tests are positive, changing this proportion of applicants from non-smokerrates to smoker rates increases the annual premium enough to go some way to mitigate the effectof misrepresentation.

Cotinine is a chemical which is produced by the body after exposure to nicotine. It can bedetected in the urine or blood and is regarded by insurers as a reliable test to confirm whethersomeone is a non-smoker. Stop smoking products such as patches, gum and liquids containingnicotine will also result in a positive cotinine test, and it is not possible to detect whether thecotinine is present as a result of cigarette smoking or the use of another product containing nico-tine – including e-cigarettes. This is not of concern at the moment because anyone using NRT istreated as a smoker.

If a new tier of pricing is introduced, misrepresentation has to be considered again, and it willbe difficult to prove whether someone is using e-cigarettes, tobacco or both, if cotinine tests cannotdistinguish between them. If a customer tells us they are only using e-cigarettes and has a positivecotinine test, there is a risk they would be able to say it was due to e-cigarettes and obtain a cheaperpremium rate, even if they smoke tobacco.

Cotinine testing is carried out by laboratories working with the insurance industry. They arecurrently working on a combination of test assays that will be able to distinguish between cigaretteand e-cigarette use. This could include a combination of cotinine, CO and anabasine.

Exhaled CO is present in tobacco smoke but not in vapour; therefore, it is present in the expiredair of smokers but not vapers. If this test is done in conjunction with a cotinine test, this canindicate whether someone is smoking cigarettes:

• −ve cotinine and −ve CO = non-smoker, non-vaper;• �ve cotinine and �ve CO = smoker, possible vaper;• �ve cotinine and −ve CO = possible vaper.

There are some issues with this method of testing though. Everyone has a small amount of COin their breath, and if they live in a polluted area, it can be quite high (although not as high as it isfor a smoker). The cut-off point which confirms that someone is a smoker is more than 10 partsper million (ppm) and for a non-smoker it is fewer than 5ppm. Between those levels, someone




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could possibly be smoking, or they could be exposed to a higher amount of pollution, so setting thecut-off point in this range means that potentially we could miss some smokers, or we could beclassifying someone a smoker when they are not. In addition, cotinine is present in the urine for 4days after exposure to nicotine, whereas CO is only present for 2–6 hours. This short detectionwindow means that it is much easier to manipulate a negative CO result by abstaining from smok-ing for a few hours than it is to manipulate the cotinine result.

Anabasine and anatabine are alkaloids seen in tobacco leaves but not in nicotine. Testing forthese could therefore be used as a tool to distinguish smokers from those using NRT where thecotinine result is positive. This has been studied in the US by the United Network for OrganSharing (UNOS) because there is a strict rule that only non-smokers are eligible for organ trans-plant, and therefore tobacco screening assays are a vital part of determining whether patients canbe registered as a candidate as an organ recipient or not. If candidates are refused based only ontheir cotinine result, those on NRT would not be eligible for a life-saving organ, so laboratorieshave been trying to develop tests to assess whether a patient is smoking cigarettes or using (and iscompliant with) NRT. For this to be reliable, these alkaloids have to be positive in smokers all ofthe time, but studies (e.g. Payton et al., 2002) have shown this not to be the case. Clinical infor-mation from UNOS showed that of 51 self-admitted smokers, 30 had negative anabasine tests.This means that if anabasine had been used to classify potential transplant patients, 60% couldhave been incorrectly classified as non-smokers, which would have a dramatic effect on the allo-cation of organs and outcomes for patients (Feldhammer & Ritchie, 2017). A 60% failure rate alsoindicates it would not be a reliable test for the insurance industry to use.

Laboratories in the UK are currently investigating ways in which a combination of tests can beused to differentiate reliably between cigarettes and e-cigarette use only, but these are not avail-able yet.

Finally, users of conventional NRT are charged as smokers in view of the possibility of relapsingto smoking tobacco. Before we treat e-cigarette use differently, it has to be established that vapingis an effective long-term solution to stopping smoking, and there is no information available atpresent to confirm this.

9.2 Claims

Cancer and cardiovascular disease, both strongly linked to smoking, are conditions which accountfor a large proportion of both life and critical illness claims. If studies are correct and e-cigarettesare proved to be a less harmful option than cigarettes then, as an industry, we should start to see animprovement in claims experience.

Although, as an industry, we pay over 98% of claims across all products, based on claims data(Association of British Insurers, 2018), there is a small number of claims that are not paid due tomisrepresentation. Smoking is one of the main areas of misrepresentation that claims assessorshave to deal with. If a customer has misrepresented their smoking habits, it is usually discoveredthrough a tele-claim call with the customer or through medical records that are obtained from aGeneral Practitioner or treating consultant to assist in the assessment of a claim. As smoking his-tory is provided in the medical records, it is usually hard for a customer to dispute and we have aclear audit trail of dates. Misrepresentation of smoking habits can lead to a reduction in the claimvalue that is actually paid and, in some circumstances, can result in no claim being payable at all.Currently, the process is clear, a customer can either be on smoker or non-smoker rates.

If an additional level of pricing is added in for e-cigarette users, there are two main areas ofconcern from a claims perspective:

1. The investigations into misrepresentation of smoking will become more complex. If a cus-tomer has disclosed themselves as an e-cigarette user only at application stage, in the event




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of a claim it may be very difficult for the assessor to prove whether this was in fact correct.At this time, we do not know how e-cigarette use will be recorded in medical records. It iswell known that many e-cigarette users are dual users, but we will be reliant solely on whatthe customer tells us, so if the customer does not disclose this we will be totally unaware of it.If there is an element of doubt around smoking habits, then the claims decision will have tobe made in favour of the customer.

2. Although customers may be genuine e-cigarette users at application stage, the relapse risk tocigarettes, and how that compares to those who have quit nicotine products completely,remains unknown currently. Any increase in relapse risk may lead to a higher proportionof smoking-related claims in the e-cigarette user risk pool than has been allowed for. Thecustomer will not have been paying the full smoker premium rate, as there is currently norequirement for customers to advise an insurer if they become cigarette smokers again.

Both concerns will ultimately mean that there will be a number of claims paid where the cus-tomer has not paid the correct premium for the risk presented, which would affect the industry’sclaims’ experience. However, it is hoped that this negative impact will not outweigh the positiveimpact of health improvements.

10. Recent media coverageIn 2019, there was an increase in negative news regarding e-cigarettes circulating in the media.

Within the USA, recent reports have linked a number of deaths to the use of e-cigarettes. Whilethis is a major concern, it is becoming more apparent that these deaths are linked to the consump-tion of unregulated liquids containing tetrahydrocannabinol (THC), the psychoactive elementfound in cannabis. It should be noted that THC is banned in the UK. While not all the recentUS deaths have been linked with THC liquid, there are issues of non-disclosure as the consump-tion of cannabis is still illegal in several states.

A recent case in the UK where a teenager was in critical condition following usage ofe-cigarettes has raised many questions around their safety. There is evidence that the medical dis-tress was due to a severe allergic reaction to a component in the liquid. Despite this, UK publichealth experts still back the use of e-cigarettes as an alternative to smoking due to the rare andisolated nature of this case.

Again this demonstrates that long-term health risks remain unknown and further studies arerequired.

11. Next stepsEvidence is slowly emerging on e-cigarette safety and their effectiveness in helping people ceasesmoking completely. But it is fair to say that we are still some way from a clear, unambiguous view.

For a firmer view to be formed on e-cigarettes and their use and risk, insurance providers andthe IFoA (through the Continuous Mortality Investigation (CMI)) could examine the feasibility ofcollecting mortality data which can then be dissected to a granular level beyond smoker/non-smoker. Such a study would take time, first for the mortality data to emerge, and then to collectand collate it.

12. ConclusionsSmoking has had one of the most significant impacts on our industry in recent memory. It has hada major effect on mortality with a consequent need to amend pricing, reserving, underwriting andclaims. But with time, the industry learned how to amend these various functions for the impact of




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smoking. E-cigarettes are still a relatively new phenomenon but also have the potential to have avery significant impact. The industry is yet to form a coherent view on how to allow for theirimpact.

We have considered a large number of sources of information but have found that some of it isquite contradictory. There is certainly not a unanimously accepted view on either the relative riskof e-cigarettes or their impact on quit rates. Nor are there any mortality studies yet. Hence, wehave had to look at a number of other types of data which are proxies for possible mortality risk.

We simply cannot form a cast iron view that says “e-cigarettes are xx% safer than smoking”with any certainty, and we feel that any attempt to write such a conclusion (even if suitablycaveated) could be viewed as an official position of the IFoA. We do not feel that is helpful.However, we are of the opinion that the majority of evidence is pointing to a conclusion thate-cigarettes are safer than tobacco but not as safe as not smoking at all.

Our paper still has a number of important takeaways even without being able to offer such aconclusion. We also feel that this is a perfect time for our industry to put forward a coherentstrategy as to how we will form these conclusions in a more robust way. We feel that the timeis right for a body such as the IFoA, through the CMI, to examine the feasibility of collectingthe necessary data that would allow us to better analyse the experience that is emerging. Atthe same time, the industry should continue to engage with the various experts in this expandingfield in order to start to form a consensus that could become our best view before “real data”become available.

DisclaimerThe views expressed in this publication are those of invited contributors and not necessarily thoseof the Institute and Faculty of Actuaries. The Institute and Faculty of Actuaries does not endorseany of the views stated, nor any claims or representations made in this publication and accepts noresponsibility or liability to any person for loss or damage suffered as a consequence of their plac-ing reliance upon any view, claim or representation made in this publication. The information andexpressions of opinion contained in this publication are not intended to be a comprehensive study,nor to provide actuarial advice or advice of any nature and should not be treated as a substitute forspecific advice concerning individual situations. On no account may any part of this publicationbe reproduced without the written permission of the Institute and Faculty of Actuaries.

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Cite this article: Daniels N, Cosma C, Llewellyn A, Banks D, Morris H, Copeland J, and Djarlijeva E. E-cigarettes: no smokewithout fire? British Actuarial Journal. https://doi.org/10.1017/S1357321720000112



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e-cigarettes: no smoke without fire?

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